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Discovery "Ineptitude" Costs Delta Airlines Another $3 Million

By Katerina E. Milenkovski, Litigation News Associate Editor – January 5, 2016

 

A federal court found that a defendant’s multiple discovery abuses warranted ordering the party to pay nearly $3 million in fees and expenses in multidistrict litigation involving allegations of airline collusion to impose a fee for the first bag checked. In re Delta/AirTran Baggage Fee Antitrust Litig. In reaching the amount, the district court increased the special master’s award recommendation that included a partner fee discount. Section leaders say the court’s rejection of the special master’s partner fee reduction provides litigators with precedent for future requests for full payment for partner services.


The Plaintiffs’ Fourth Motion for Sanctions
The U.S. District Court for the Northern District of Georgia had already imposed nearly $5 million in discovery sanctions against Delta in this dispute as a result of prior motions filed by the plaintiffs. The plaintiffs’ fourth motion for sanctions sought to preclude Delta from disputing the existence of a conspiracy with AirTran to impose first bag fees, or alternatively, to require the jury to draw an adverse evidentiary inference against Delta based on its pattern of misconduct. The plaintiffs also claimed that Delta’s motion for summary judgment should be denied, as Delta’s actions created a factual issue regarding bad faith spoliation, which rendered summary judgment inappropriate. Finally, the plaintiffs sought reasonable fees and expenses.


The court appointed a special master, who presided over several days of evidentiary hearings related to the plaintiffs’ claims. The special master’s report and recommendations rejected the spoliation arguments, finding insufficient evidence that unique responsive information had been lost or destroyed. Nevertheless, he found that Delta had breached its discovery obligations and recommended that Delta be sanctioned under a non-spoliation theory. Thus, while rejecting the evidentiary and merits-based sanctions that the plaintiffs sought, the special master recommended that the court impose a monetary sanction of $1.8 million against Delta to compensate the plaintiffs for the additional time and expense they had incurred and to deter similar misconduct in the future.


Court Increases Special Master’s Recommended Award
Upon de novo review, the court upheld the special master’s report and recommendations as well-reasoned. However, the court found merit in the plaintiffs’ objections concerning the monetary sanction proposed by the special master and increased the monetary sanctions against Delta from $1.8 million to $2.7 million. As the court pointed out, while this might seem like a harsh penalty, it was in some sense a victory for Delta, who “dodged the bullet of spoliation sanctions for the fourth time.”


In amending the monetary sanctions, the court determined that current billing rates should be used to calculate the award, particularly where the delay in payment of certain fees that the plaintiffs sought was caused by Delta’s discovery failures. The court also limited the scope of an across-the-board 10 percent reduction in fees that the special master had imposed for duplicative work, and threw out altogether a 20 percent reduction in fees that the special master imposed on bills he viewed as too partner-heavy.


“This case simply underscores that discovery has gotten way out of hand,” says Loren Kieve, San Francisco, CA, member of the ABA Section of Litigation’s Federal Practice Task Force. “As far as I can tell, and as far as it appears the judge determined, none of the documents in issue was either a smoking gun or came anywhere near to being a key piece of evidence in the plaintiffs’ case. I suspect this helped the judge conclude that sanctions other than monetary ones were not warranted,” Kieve explains.


“The court was frustrated with both sides in this discovery fiasco,” notes Ian H. Fisher, Chicago, IL, past cochair of the Section of Litigation’s Pretrial Practice & Discovery Committee. “The judge accused Delta of ‘ineptitude and missteps’ throughout the discovery process, but he also chided the plaintiffs, saying that looking for evidence in their briefing was like searching ‘for a needle in a haystack.’” The court did not award the plaintiffs their portion of the fees paid to the special master, which Kieve believes should have been covered.


No Fee Discount for Partner-Level Involvement in Case
Part of the court’s adjustment to the award came because the court agreed that the special master should not have reduced the fees awarded on the basis of what he viewed as excessive partner involvement. “Given the court’s ruling, partner work should not be subject to a fee reduction if the partner actually did the work, as appears here,” adds Kieve. “In many situations, direct partner involvement can reduce the overall amount of a fee because the partner can do the job more effectively and efficiently and with better judgment than an associate or paralegal. And a partner then doesn’t have to have someone else review the work,” Kieve explains. “The issue of the most efficient allocation of work plays out not only in fee petitions like this, but also outside of public view between clients and their attorneys in many large engagements. Here, the court recognized that smaller firms are often more leanly staffed and reversed the special master’s discount for partner-heavy billing,” Fisher points out.


Monitoring Clients’ Efforts in Responding to E-Discovery
“The key to avoiding sanctions is sweating the details and making sure you know just what the client is doing when responding to a discovery request that encompasses electronic evidence,” Kieve advises. “Here, the mistake was Delta’s, not Delta’s counsel,” he adds. “Delta’s attorneys faced a very tough situation after Delta repeatedly failed to preserve documents and then failed to produce relevant documents. The fact that Delta avoided an evidentiary sanction—such as a preclusive finding that it engaged in an antitrust conspiracy—is a credit to its attorneys,” says Fisher.


Keywords: discovery, sanctions, special master, fees, electronic discovery


 
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